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Wedbush: Winter Inventory Is 'Out Of Place' At Some Retailers; Express, Others Are Looking Better

Wedbush: Winter Inventory Is 'Out Of Place' At Some Retailers; Express, Others Are Looking Better
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Retailer season is upon us.

Folks are prepping for summer and retailers are competing for attention. Wedbush believes retailers are taking productive efforts to drive traffic, test new products, and push strong "sell-through" numbers.

In a new note, Wedbush analysts praised Express, Inc. (NYSE: EXPR)'s effort to test Express One Express, which is geared toward the concept of "super-soft fabrics bringing a sexy update to your casual tops." Customers appear pleased, they wrote, especially given that bralettes have sold out online.

With promotional marketing down since last year, though, Wedbush will remain "constructive on 1Q15 EPS" for the time being.

Gap Inc (NYSE: GPS)'s Banana Republic has been able to cut promotional activity as well. The division is now running "30 percent off full-priced items" and "40% off" for card members currently, compared with prior year discounts of "40 percent of full-priced items" and "50 percent off."

Gap Denim

Gap denim has been moving well too, as Wedbush notes:

"As for the Gap division, strength in denim was confirmed this weekend, with most of our mall checkers noting zero promotions on denim, and only select stores running 30% off jeans versus 40% off jeans last year."

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The Urban Outfitters, Inc. (NASDAQ: URBN) story isn't as rosy. Q1 margins and promotional activity tracking above last year has Wedbush "nervous." Clearance items, which mostly consist of over-sized tops, sweaters and denim have been slow to move, but this has been trumped by non-apparel inventory strength.

Winter Inventory 'Out Of Place'

American Eagle Outfitters (NYSE: AEO), meanwhile, has struggled to move winter inventory.

"[Winter inventory] seemed out of place next to the new swimsuits and flip flops that were put out at the back of the stores," Wedbush analysts explained. One saving grace was American Eagle's decision to stock transitional items such as leggings, long-sleeve flannel and denim shirts for the continuing wintry weather in the Northeast.

Final Thoughts

Overall, it appears retailers are doing better, but they're clearly benefiting from a consumer willing to spend on promotional merchandise. A build up of winter inventory could be harmful on margins as it takes up floor space that could be used for summer gear.

Wedbush appears hopeful that continued wintry conditions in the Northeast will help move this inventory.

Image credit: Mike Mozart

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